When crisis hits, is responding quickly always the best move? Elizabeth Low explores the dilemma PR and legal have in such situations.
Likely the worst PR disaster in recent history, BP's massive Gulf of Mexico oil spill cost the company deeply. The 2010 incident is unfortunately now a painful case study of a crisis communications failure.
The most recent development had the company having its appeal to cancel the terms of its multi-billion-dollar settlement with businesses rejected and the company continuing to bleed as it faces an avalanche of claims. “It was never our intention for the company to become an open cash register for every claim or project anyone could dream up,” spokesman Geoff Morrell told Bloomberg Businessweek, highlighting the company’s plight.
According to BBC, BP has faced about US$42.4billion in criminal and civil charges since the incident.
When the crisis freshly hit and then chief executive Tony Hayward stepped forward with a volley of insensitive remarks, dodging blame and arguably downplaying the disaster, analysts predicted reputational damage would cost BP more than US$9billion, according to an article by The Guardian.
During the crisis, one other main criticism was the lack of communication overall during the entire fiasco, aside from pushing blame.
PR industry players are arguing that the incident was a perfect pivotal point for change in the age old public relations and legal tussle.
Where PR and legal lock horns
While both functions have the same objectives: Resolve the crisis quickly and save the company’s reputation (and money), legal tends to view these objectives through a defensive and cautious prism.
However for the PR function, crisis is often seen as an opportunity for the company to demonstrate that it believes in and live its mission statement, says Brian West, managing director, reputation management, Asia Pacific and Global and chair, crisis management, Fleishman-Hillard.
“When a crisis strikes, many attorneys have the same instinct: to clamp down on corporate communications and make the fewest number of public statements possible (if any at all). That’s because an attorney’s primary job is to minimise future financial payouts and, in cases of criminal wrongdoing, to reduce a company’s culpability in any future legal action," writes president of Phillips Media Relations, Brad Phillips, in the book The Media Training Bible.
However, while legal action might be won, or the payout minimised in three to six years’ time, at what cost to the reputation and therefore, the financial health of the business, is this done? The cost of loss of reputation can easily exceed any future payout, suggests West.
Here's where PR steps in – on the “court of public opinion”. West argues that the lashout from key stakeholders from poor communication may eventually cost the company more.
“One needs to consider the impact of a crisis on the debt capital provider’s (banks) willingness to continue to provide that financial lifeline; the reaction of the equity capital holders (shareholders), will they dump the shares? Will the government regulate the industry? Will employees leave and prospects not join? Will customers stop buying the company’s product?” he says.
Another PR lead from a major firm in the aerospace sector highlighted the tension. “It is almost always challenging because we are a dichotomy on two things - speed and language - and we work from different angles.”
“In crises, a communicator tries to mitigate further (or anticipated) reputation damage by responding with speed and using sensitised language, while legal tends to concentrate on trying to say as little as possible in order to maximise legal defence when responding to the legal aspects of crises,” she adds.
She pointed out the case of Schindler's PR crisis in Japan.
In 2006, a Schindler elevator in Tokyo, started ascending while the door was open. A 16-year-old boy was crushed to death while getting off the elevator with his bicycle. An investigation determined a faulty brake was to blame.
“An apology or expression of regret would have softened the Japanese reaction to Schindler. Legal prevented the apology, because it is seen in the West as an admission of fault in the unfortunate event, and correctly, wanted Schindler not to be exposed to investigation or liability,” she added. However, the fiasco cost Schindler deeply as it later struggled to sell its elevators in the market.
The main takeaway?
“Don’t be afraid to apologise. PR experts and lawyers tend to lock horns over this, as an apology is often viewed as an admission of guilt – with all of the attendant legal implications. In Asia, however, an apology can often end a public crisis. But it has to be sincere,” concludes West.
He suggests making local employees first responders by empowering them to communicate in a crisis – “rather than waiting for them to email New York, and wait for legal to draft something, which gets circulated amongst a dozen people and approved three days later. Someone needs to be trained, empowered and authorised to speak to media as soon as the story breaks,” he adds.
However, the situation in many companies is that law still has veto-rights over communications, which usually makes communications highly conservative, says Bruce Blakeman, vice president corporate affairs, Asia Pacific Cargill International Trading.
Legal issues PR needs to heed
While a strong public relations strategy is key in a crisis, good legal caution must be thrown into consideration. There are several vital points where PR professionals need to pay extra heed to.
For example, where there is a chance of libel or defamation. The PR lead, who declined to be named, concedes that these are the instances where it is most beneficial to work with legal. “Given that in crises there is always a risk of libel, we usually end up working closely with legal. Arguments about semantics in statements and spokesperson are almost unavoidable,” she says.
Another gray area is in technology and social media.
In a blogpost, marketing consultant Deb McAlister-Holland says one of most contentious areas in social media litigation is the ownership of social media accounts and content.
“From lawsuits over LinkedIn contacts to disputes about Twitter accounts to wrangles over employee adherence to social media policies, this is the fastest growing area of legal troubles for all marketers. If you have an existing social media account before you take a PR job, and you will be using that account to post or share information for your new client or employer, make sure that the ownership of the existing social media account is spelled out before the first post is made,” she says.
Social law expert and Dallas attorney Sean E. Tuma was quoted in her piece saying that though legislatures want to keep up on social media law, these often fall short. For Singapore, social media remains largely unregulated for now.
Another important area is knowing the regulations of the market or industry you operate in. While most public relations professionals may well be aware of these, employees may not. For this, Holland advises creating a social media policy and training employees in it, as well as involving legal and compliance teams in the PR and social media planning process, particularly if it is a new area for the company.
A balanced approach
Ultimately, it looks like the tussle goes on. While some companies remain conservative, some PR professionals look determined to stick to their principles. But most emphasise a need for a smoother relationship. “In a crisis, we run a statement past legal to get their input, but they don’t make the final decision. So it’s more of a partnership. Usually we both give and take on the original drafts to meet our legal and stakeholder communications needs,” says Cargill's Blakeman.
“The relationship can be a tedious one to navigate in a situation of high pressure. It is valuable to inculcate a friendly relationship outside crisis situations to create an understanding of each other roles and the benefits one can give the other,” says the aerospace sector PR lead.
Nick Jacobs, PR director, Intel Asia Pacific & Japan says PR professionals need to build trust with legal as well.
“By adopting a calm and measured approach, PR professionals can build trust and credibility with legal peers – that way, the next time a challenging situation arises, greater emphasis may be placed on reputational considerations, while still preserving the over-arching goal of avoiding undue risk of liability,” Jacobs says.